Nykaa's Q3 profit sinks 71% on higher festive discounts, lower consumer spending

Lower discretionary spending, store expansions, higher employee benefits costs and other expenses squeezed margins during the quarter, even as revenue jumped 33%.

Nykaa's Q3 profit sinks 71% on higher festive discounts, lower consumer spending

Monday February 13, 2023,

3 min Read

Beauty retailer Nykaa's net profit for the December quarter plunged 71% with category changes in its highest contributing beauty and personal care business and higher festive discounts, among other significant expenses, squeezing margins.

The Falguni Nayar-led ecommerce firm's revenue jumped 33% from a year earlier to Rs 1,463 crore, in line with analysts' estimates, while net profit dived to Rs 8.5 crore from Rs 29 crore in the corresponding year-ago period. 

Total expenses in the third quarter rose 36% year-on-year to Rs 1,456 crore. Higher employee benefits costs and other expenses dragged Nykaa's EBITDA margin down to 5.3% from 6.3% a year earlier. 

"Margins were affected by lower consumer discretionary spending," MD and CEO Falguni Nayar said in a post earnings call, adding that Nykaa aims to add 50 offline stores next year. The company, primarily an online first brand, currently has 135 stores across India, up from 95 in the year-ago third quarter.

The company, however, expects the final quarter for the fiscal year to be “decent” and “more interesting” owing to India’s wedding season and its ongoing Pink Love sale.

The Mumbai-based firm’s gross merchandise value (GMV), or the total worth of all the goods and services sold on the platform without factoring in discounts and other such aspects, grew 37% across segments to Rs 2,796 crore.

The beauty and personal care segment, Nykaa’s largest revenue generator, saw a 26% rise in GMV to Rs 1,901 crore, while the fashion segment grew 50% to Rs 724.4 crore.

The BPC segment's monthly active users increased 22% from a year earlier to 24.2 million. At Nykaa Fashion, monthly active users increased 18% to 19.4 million.

Nykaa's Pink Friday Sale in November achieved a 40% GMV growth, the company said in a statement.

Nykaa’s next growth frontier: Global brands and more physical stores

“The business has delivered consistent strong GMV and revenue growth. The performance has been especially good given the backdrop of eight fewer festive days in Q3FY23, compared to Q3FY22,” Nayar said.

Fashion now contributes 25.9% of GMV. Other business led by SuperStore, Nykaa’s business-to-business initiative, now contributes 6.1% of GMV, up from 2.4% in the year-earlier third quarter.

The company also said it had established a presence in e-marketplaces in the United States, the Mauritius, and the UAE in the previous quarter.

Nykaa also named that Sujeet Jain, chief legal and regulatory officer, would take over as company secretary and compliance officer effective February 14, in place of Mr. Rajendra Punde. The company recently appointed former TAFE Group CFO P Ganesh as its finance head effective February 3.

On Monday, Nykaa's shares fell 2.68% to close at Rs 150.55 apiece ahead of the results announcement.

(This story was updated with additional details.)

Edited by Saheli Sen Gupta and Feroze Jamal